I called it in 2007 when I said that those $60-90 “processing fees” were illegal “kickbacks” that Realtors and Brokers got for pushing Home Warranty companies. (see 2007 post).
My exact words in 2007 in case you missed it: “I wouldn’t be surprised if soon there is a class action lawsuit that will come after these firms and the Realtors that are colluding to the detriment of their client.”
Well it finally happened. Of course the defendant doesn’t agree with or accept any responsibility. Here is the website announcing the class action settlement. It is against AHS, the #1 home warranty company. The period is from May 2007 to Dec 2010. AHS was selling home warranties for $400 and giving the recommending broker $60 to $90 in “admin fees.”
Why does this matter? Kickbacks are illegal under RESPA (google it).
And in case you missed it, our “Excellence Comes Standard” ™ client bill of rights #4 has always been, “No Home Warranty Kickbacks.” I know many might say “Duh, of course my agent should not be getting bribed,” but your Duh is not reality and yes agents get excited over $60. And yes it is only $60, but I think it signals a deeper problem of disclosure and fiduciary duty.
“Are you working on my behalf of not!” $60 here and… $10,000 there when your agent throws you under the bus, without authorization, and tells the other agent you are willing to pay more. And don’t think I don’t see this a fair amount. (ie sucky agents)
(Focus Frank, focus) The settlement calls for about a $45 to $60 refund.
Here is the tricky part. The settlement says those that qualify are “settlement class member’s purchase of the home service contract.” [sic] And supposedly people are getting letters from AHS telling them that they may qualify. But where are those letters likely to go to? To the home being warrantied! Who most likely bought the warranty? The seller! Ha. The seller’s contact information is usually nowhere on the application to purchase the warranty. So how do THEY get paid. I know, kinda boring and academic, but interesting to me.
What now? What is the latest trick or workaround?
Now the warranty firms (some stopped the practice) actually have the agent “do something” so it won’t be considered an illegal kickback. Not sure exactly what is done (if you know, add it to the comments). Probably it will entail having the agent walk around the house and check off boxes.
What a mess.
Should have just followed my advice in 2007.
Frank Borges LLosa J.D.
P.S. Hartly is almost one. (pic by AbbyKellyPhoto)